BP Accused by Victims of Racketeering Law Violation

Jan. 25 (Bloomberg) -- BP Plc was accused by oil-spill
victims’ lawyers of breaking civil racketeering law by engaging
in acts that led to the worst such disaster in U.S. history.

“BP engaged in a pattern of fraudulent conduct directed at
regulators from the inception of the Macondo project, continuing
through and after the spill and to this day,” victims’ lawyers
Stephen Herman and James Roy, said yesterday in a court filing
in New Orleans. “BP’s fraudulent actions and omissions were
part of a broader pattern of unlawful conduct that it has
employed over the years to place profits over safety.”

Herman and Roy are liaison counsel for a committee
representing plaintiffs in more than 400 lawsuits over personal
and economic injuries caused by last April’s explosion of the
Deepwater Horizon drilling rig off the Louisiana coast.

The rig, owned by a unit of Transocean Ltd., was drilling
the well, named Macondo, for BP at the time of the blast. BP is
the only company named as a defendant in the spill victims’
master civil complaint under the Racketeer Influenced and
Corrupt Organizations Act, or RICO, originally aimed at
organized crime.

Daren Beaudo, a BP spokesman, declined to comment on the
filing.

BP’s own report into the Deepwater Horizon disaster placed
much of the blame on its contractors, including rig owner
Transocean and Halliburton Energy Services, which provided
cementing services for the well. BP says cost considerations
don’t compromise safety in company operations.

Feinberg Fund ‘Deficiencies’

In another development yesterday, Mississippi Attorney
General Jim Hood asked the judge overseeing oil-spill litigation
against London-based BP to take an oversight role to “correct
deficiencies” in the $20 billion spill-claims fund run by
Kenneth Feinberg.

Feinberg has been criticized by spill victims’ lawyers for
his administration of the claims process through which BP has
said it would pay “all legitimate claims” filed by people and
businesses.

Critics contend Feinberg has delayed or denied claims
without adequate explanation and established protocols that
encourage cash-strapped claimants to accept small, quick
payments to avoid years of litigation.

“It is the state’s position that this court has
jurisdiction over the Gulf Coast Claims Facility, including its
administrator Kenneth Feinberg,” Hood said in papers in the
court in New Orleans.

Company ‘Surrogate’

Feinberg’s fund “is nothing more than a surrogate for BP
in the administration of the claims process that BP is required
to provide” under federal law, Hood said.

Amy Weiss, a spokeswoman for Feinberg, declined to comment.

Hood said Feinberg hasn’t cooperated with attorneys general
of the five Gulf Coast states or changed the fund’s claims
payment process as they requested. He attached 61 pages of
letters between the state lawyers and the Feinberg fund.

Requiring claimants to release BP and other involved
companies from liability for future damages to settle their
claims quickly is unfair, Hood wrote to Feinberg on Nov. 9.

“Only people who are beaten down, poor, and/or desperate
would agree to the terms of the proposed release,” Hood wrote.
“The excessive breadth of the release will lead the public to
believe” that the fund’s goal “is not to assist people in the
Gulf, but to assist BP in taking advantage of this downtrodden
group of people,” he said.

New Filing

Herman and Roy today filed additional papers asking U.S.
District Judge Carl Barbier. to require Feinberg to disclose his
BP ties to claimants seeking compensation from his Claims
Facility. The lawyers want the judge to order Feinberg to
“refrain from referring’’ to his fund, himself or his lawyers,
who are hired by the fund and paid by BP to advise on
settlements, as “independent or neutral.’’

“The Gulf Coast Claims Facility is nothing more than an
alter ego of the BP defendants,’’ with Feinberg and his law firm
“acting as BP’s attorney,’’ Herman and Roy wrote.

They asked that Feinberg be required to inform claimants
they can submit a three-page short form that lets them
participate in the litigation against BP and other companies
involved in the spill.

Barbier placed an electronic copy of the short form, which
doesn’t require a lawyer or any filing fees, on his court’s
website two weeks ago to ease public access.

RICO Filing

Herman and Roy claimed in yesterday’s 93-page RICO filing
that BP knowingly broke U.S. environmental laws, skirted federal
rules on offshore oil and gas extraction, and misrepresented its
ability to stop and clean up a deepwater spill.

They cited examples of BP conduct taken from reports issued
by the Obama administration’s presidential spill commission and
the University of California at Berkeley’s Deepwater Horizon
Study Group. Details are also drawn from documents and testimony
presented to Congress and a joint panel of offshore regulators
and the U.S. Coast Guard, which is also investigating the
incident.

The explosion and spill “were foreshadowed by a string of
disastrous incidents and near misses in BP’s operations on land
and at sea,” the attorneys said. “BP has, since at least 2001,
used this enterprise to conduct the related acts of mail and
wire fraud comprising the pattern of racketeering.”

The victims’ lawyers claim BP overlooked or downplayed the
importance of “significant problems related to the Deepwater
Horizon’s equipment and maintenance.” The rig was leased to BP
for its entire nine-year history.

Notice of Flaws

BP was “on notice” of flaws with the rig’s blowout
preventer, alarm systems, ballast systems and other
“significant deficiencies” after a September 2009 company
audit of the Deepwater Horizon found 390 overdue maintenance
jobs, many of which were of high priority, the lawyers said.

They also claim BP well managers intentionally
misrepresented portions of the Macondo well-drilling plan to
regulators and misled spill responders on the best methods for
stopping the underwater gusher, which released more than 4.1
million barrels of crude into the Gulf of Mexico.

The case is In Re Oil Spill by the Oil Rig Deepwater
Horizon in the Gulf of Mexico on April 20, 2010, 2:10-md-2179,
U.S. District Court, Eastern District of Louisiana (New
Orleans).